The cryptocurrency market witnessed a sharp downturn in Q1 2025, with total market capitalization plummeting by 18.6%, resulting in a loss of $633.5 billion, according to CoinGecko’s quarterly report.
This significant drop reflects growing investor concerns amid persistent recession fears and global economic uncertainties.
Daily trading volumes also took a substantial hit, decreasing by 27.3% quarter-on-quarter (QoQ) to an average of $146.0 billion.
For context, trading volumes stood at $200.7 billion in Q4 2024.
This decline extends to centralized exchanges as well, which recorded a 16% drop in trading volume compared to the previous quarter. The report cites recession worries, coupled with the aftermath of the Bybit hack, as key contributors to this trend.
Key Highlights and Market Dynamics
Although January brought a brief period of market euphoria, fueled partly by optimism surrounding political events such as Trump’s inauguration, recession fears soon overshadowed any gains. As investor activity dwindled, token prices and trading volumes steadily declined.
- Bitcoin (BTC) retained its position as the dominant cryptocurrency, accounting for 59.1% of the market’s capitalization in Q1.
- Despite its prominence, BTC fell by 11.8% during the quarter and underperformed relative to gold (+18.0%) and U.S. Treasury bonds, which were seen as safer asset classes.
- Stablecoins emerged as a silver lining in the otherwise turbulent market. Tether (USDT) slightly increased its market share to 5.2%, while USD Coin (USDC) regained the #7 spot, surpassing Dogecoin (DOGE).
In contrast, Ethereum (ETH) experienced a decline, losing 3.9 percentage points (p.p.) in market dominance to reach 7.9%, marking its lowest point since late 2019. XRP and BNB were the only major tokens to retain their market share, underscoring their resilience amidst broader declines.
Spotlight on DeFi and Blockchain Trends
Decentralized finance (DeFi) also struggled in Q1 2025, with multichain total value locked (TVL) decreasing by 27.5%. TVL fell from $177.4 billion at the end of 2024 to $128.6 billion by March 2025, largely driven by the depreciation of altcoins.
- Ethereum suffered the most significant impact, with its TVL dominance falling from 63.5% to 56.6%. Solana and Base also saw notable declines in TVL, although both networks slightly increased their overall dominance.
- Despite the broader downturn, new players such as Berachain made a striking debut, launching on February 6 and reaching $5.2 billion in TVL by the end of Q1 2025.
Berachain’s Boyco pre-deposit vaults alone attracted approximately $2.3 billion in funds, positioning the blockchain as a key contender in the DeFi space.
DEX Trading Trends: Solana’s Strong Start
The report highlighted Solana’s dominance in decentralized exchange (DEX) trading, with its market share rising to 39.6% for the quarter.
- Solana experienced rapid growth in January, accounting for 52% of on-chain trades among the top 12 blockchains, fueled by the “political memecoin” frenzy led by $TRUMP.
- However, as the memecoin trend waned, Ethereum reclaimed the top spot in March, achieving a market share of 30.1% compared to Solana’s 23.4%.
- Newcomers Sonic and Berachain disrupted the market by edging out Optimism and Polygon in March.
Despite this shake-up, Optimism and Polygon managed to maintain their positions for most of the quarter, highlighting the competitive nature of blockchain ecosystems.
What you should know
In the broader financial landscape, gold emerged as the strongest-performing asset class in Q1 2025, gaining 18.0%.
- Other risk assets, including the NASDAQ (-10.3%) and S&P 500 (-4.4%), experienced declines similar to BTC, reflecting market-wide concerns.
- On the currency front, the Japanese Yen (+5.2%) and Euro (+4.5%) strengthened against the U.S. Dollar as the Bank of Japan raised interest rates, further unwinding the Yen carry trade.
Meanwhile, the U.S. Dollar Index (DXY) fell 4.6%, potentially influenced by uncertainty surrounding U.S. tariffs and broader geopolitical factors.
